Correlation Between Inverse Mid-cap and Dow 2x
Can any of the company-specific risk be diversified away by investing in both Inverse Mid-cap and Dow 2x at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Inverse Mid-cap and Dow 2x into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse Mid Cap Strategy and Dow 2x Strategy, you can compare the effects of market volatilities on Inverse Mid-cap and Dow 2x and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Inverse Mid-cap with a short position of Dow 2x. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Mid-cap and Dow 2x.
Diversification Opportunities for Inverse Mid-cap and Dow 2x
-0.96 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Inverse and Dow is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Mid Cap Strategy and Dow 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow 2x Strategy and Inverse Mid-cap is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Inverse Mid Cap Strategy are associated (or correlated) with Dow 2x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow 2x Strategy has no effect on the direction of Inverse Mid-cap i.e., Inverse Mid-cap and Dow 2x go up and down completely randomly.
Pair Corralation between Inverse Mid-cap and Dow 2x
Assuming the 90 days horizon Inverse Mid Cap Strategy is expected to under-perform the Dow 2x. But the mutual fund apears to be less risky and, when comparing its historical volatility, Inverse Mid Cap Strategy is 1.66 times less risky than Dow 2x. The mutual fund trades about -0.17 of its potential returns per unit of risk. The Dow 2x Strategy is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 17,446 in Dow 2x Strategy on August 28, 2024 and sell it today you would earn a total of 1,962 from holding Dow 2x Strategy or generate 11.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse Mid Cap Strategy vs. Dow 2x Strategy
Performance |
| Timeline |
| Inverse Mid Cap |
| Dow 2x Strategy |
Inverse Mid-cap and Dow 2x Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Mid-cap and Dow 2x
The main advantage of trading using opposite Inverse Mid-cap and Dow 2x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Mid-cap position performs unexpectedly, Dow 2x can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dow 2x will offset losses from the drop in Dow 2x's long position.| Inverse Mid-cap vs. Western Asset High | Inverse Mid-cap vs. Metropolitan West High | Inverse Mid-cap vs. Lgm Risk Managed | Inverse Mid-cap vs. Artisan High Income |
| Dow 2x vs. Dow 2x Strategy | Dow 2x vs. Dow 2x Strategy | Dow 2x vs. Nasdaq 100 2x Strategy | Dow 2x vs. Ultramid Cap Profund Ultramid Cap |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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